These smart money moves will improve you financially and make you richer this year :-
1.) Choose Gold Bonds over Gold Funds
Gold ETFs were once considered as a great investment in the metal. However, this is no longer true. Sovereign gold bonds give better returns than gold funds. Even though both products rely on gold prices and their returns are based on the metal’s performance, but Gold ETFs charge around 1% per annum as expense ratio, gold bonds offer an interest of around 2.5% per annum. So, Gold Bonds will generate 3.5% more returns per annum than gold ETFs.
2.) Check mid- and small-cap exposure
The Sensex rose to 28% in 2017 but mid- and small-cap stocks did even better. Experts warn that the mid- and small-cap have become overvalued and investors should avoid them now. The BSE Midcap has a PE of 46.7 while BSE Smallcap has a PE of 114.5. Over the past few months, several mid- and small-cap funds in this category have restricted inflows and some are accepting only SIPs.
3.) Invest in short-term debt schemes
Debt funds gave insipid returns in 2017, much to the disappointment of investors who had got used to double-digit returns in the preceding 1-2 years. Rising crude oil prices and concerns over meeting the fiscal deficit target made the bond market uneasy, causing a spike in bond yields from 6.4% in January 2017 to 7.3% in December. Experts say investors should stick to short-term debt funds which are not very volatile and are expected to give stable returns.
4.) Stay away from cryptocurrencies
The recent crash in Bitcoins and other cryptocurrencies is a wakeup call for investors. Normal investors should stay away from Bitcoins as they will get the buy and sell timing horribly wrong. Bitcoin is a classic case of the fear of missing out on making money. Some young techies are still chasing it.
5.) Rent instead of buying
Increasingly, people are turning to taking utilitarian products on rent which is both cost-effective and convenient. Given that moving to different cities or localities within a city has become a routine affair, especially for young professionals, renting furniture is gaining popularity. Taking a set of basic furniture and appliances on rent will cost you ₹10,000-15,000 a month. Rentals also come with free delivery and installation, relocation, cleaning and maintenance.
6.) Use NPS to save for retirement
The low cost structure of the NPS makes it one of the cheapest market linked products available to Indian investors. Besides, NPS allows partial withdrawals for specific purposes. Also, one can remain invested after retirement and spread the withdrawals over the next 10 years. This can significantly reduce the tax impact. Opening an NPS account is now a completely paperless exercise. It takes barely 20-25 minutes to open an account if your bank account and PAN are linked to your Aadhaar Card.
7.) Prepay home loan if no tax benefit
Till last year, if a property was leased out, the entire interest paid on the loan could be claimed as a deduction. High-net worth investors used this provision to cut their tax liability. A ₹1 crore loan taken at 8.75% for 20 years could fetch a deduction of ₹8.67 lakh and potentially reduce the borrower’s tax liability by almost ₹2.5 lakh in the first year. However, last year’s Budget capped the total deduction at ₹2 lakh. So, instead of putting money into fixed deposits, PPF and debt funds, prepay your debts.